The Pound Sterling is falling from an intraday resistance zone as the Dollar recovers some losses on Tuesday. The following GBPUSD Elliott wave analysis looks at what could happen next.
October 6, 2020 / AtoZMarkets – GBPUSD bounces off 1.2678 and will most likely continue the bullish correction toward 1.3083 and 1.3178 technical Fibonacci retracement levels. However, in the short term, the current rejection around the 1.3 psychological level could push the pair toward 1.2815. The October 15 Brexit deadline looms and together with the politics in the US, the cable shouldn’t be short of big moves in the coming weeks.
GBPUSD Analysis: major drivers
The dollar has been the major driver of the Forex majors since September. A scary no-deal Brexit and a bullish dollar dragged GBPUSD down by close to 800 Pips in September. A retreating dollar in the last week of September then triggered a Cable bounce off the 1.27-1.28 support zone. The currency pair has not looked back. The pair is currently attempting a sufficient break above the psychological 1.3 level. The following events could influence GBPUSD analysis for the coming weeks
Wednesday FOMC minute
Wednesday FOMC Meeting Minutes is very vital. September was rough for equities and thus gave the safe-haven USD the edge against its major peers. However, the market is anticipating fresh stimulus package from the banks starting from their next meetings as Covid-19 second wave drags down economic recovery. The dollar is already on the back foot and might meet further setback as equities remain the priority ahead of November US elections.
A dovish Fed with more QE should drag the greenback further downside. GBPUSD should then shatter 1.32 toward the 1.3485 resistance level. However, if the Fed remains cautious despite a dovish tone, the upside Cable should be capped around 1.31. Meanwhile, after the Fed meeting, GBP traders will focus on the negotiations between the EU and UK representatives concerning a post Brexit deal.
Post-Brexit EU-UK trade deal negotiation
UK PM has chosen October 15 for the post-brexit trade deal negotiation between the UK and EU ahead of the December official exit. A no-deal Brexit outcome would encourage the bears to shatter 1.27 toward 1.24 depending on how far the current recovery goes before the next week deadline. A successful negotiation would support further rallies.
Traders and investors will keep close eyes on the US politics ahead of the November 3 election. The markets seem to favor Trump with his tax cutting and equities supporting policies. However, the oppositions promise more QE packages but with tighter regulation and less elaborate fiscal policy. As elections draw nearer, market perception of the candidates might change and traders will need to watch out.
GBPUSD Elliott wave analysis: what next for the Cable?
From the long-term perspective, the rally from 1.14 to 1.3485 completed a bullish corrective pattern. At least a three wave decline toward 1.2 should follow as the chart below shows. The decline from 1.3485 to 1.2678 is impulsive and can represent the first leg of the expected 3-wave decline.
Meanwhile, the current resurgence from 1.2678 could continue to the 50%-61.8% Fibonacci retracement levels at 1.3083 and 1.3180 or even 1.321 resistance before the decline continues. Meanwhile, if the 1.3 level continues to hold, a decline toward 1.281 might happen at the short-term before the bullish correction proceeds.
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